Correlation Between GigaMedia and Smiths Group
Can any of the company-specific risk be diversified away by investing in both GigaMedia and Smiths Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GigaMedia and Smiths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and Smiths Group plc, you can compare the effects of market volatilities on GigaMedia and Smiths Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GigaMedia with a short position of Smiths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Smiths Group.
Diversification Opportunities for GigaMedia and Smiths Group
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GigaMedia and Smiths is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Smiths Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smiths Group plc and GigaMedia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GigaMedia are associated (or correlated) with Smiths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smiths Group plc has no effect on the direction of GigaMedia i.e., GigaMedia and Smiths Group go up and down completely randomly.
Pair Corralation between GigaMedia and Smiths Group
Assuming the 90 days trading horizon GigaMedia is expected to generate 4.41 times less return on investment than Smiths Group. In addition to that, GigaMedia is 1.72 times more volatile than Smiths Group plc. It trades about 0.02 of its total potential returns per unit of risk. Smiths Group plc is currently generating about 0.19 per unit of volatility. If you would invest 2,060 in Smiths Group plc on November 2, 2024 and sell it today you would earn a total of 142.00 from holding Smiths Group plc or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
GigaMedia vs. Smiths Group plc
Performance |
| Timeline |
| GigaMedia |
| Smiths Group plc |
GigaMedia and Smiths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GigaMedia and Smiths Group
The main advantage of trading using opposite GigaMedia and Smiths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, Smiths Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Smiths Group will offset losses from the drop in Smiths Group's long position.| GigaMedia vs. Fukuyama Transporting Co | GigaMedia vs. Gaztransport Technigaz SA | GigaMedia vs. BII Railway Transportation | GigaMedia vs. Semiconductor Manufacturing International |
| Smiths Group vs. X FAB Silicon Foundries | Smiths Group vs. Molina Healthcare | Smiths Group vs. SHIP HEALTHCARE HLDGINC | Smiths Group vs. National Health Investors |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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